Corporate insolvencies increase by 16% compared to July last year as cost increases continue to be felt
According to official figures, the number of companies that went bankrupt in July was 16 percent higher than in the same period last year.
In England and Wales, 2,191 companies went bankrupt, according to the Insolvency Service, compared with 1,890 in July 2023.
The figures include 320 compulsory liquidations – when a company is forced to close, usually because it has debts it cannot pay – which is the highest monthly figure since before the Covid-19 pandemic.
David Hudson, restructuring advisory partner at FRP, said the increase reflected “months of high interest rates, weak demand and persistent costs”.
He said: “We expect that the number of insolvencies will remain high for some time.
“While economic conditions are improving, the resilience of many companies has been weakened since the start of the pandemic. They are now accumulating high levels of debt that they will find difficult to maintain even as interest rates fall and consumer confidence rises.”
There were now 25,551 bankruptcies in the twelve months up to July 2024, more than at the height of the financial crisis in 2008.
However, the Insolvency Service pointed out that the increase in the number of registered insolvencies since the financial crisis was partly due to the fact that more companies were registered with the commercial register.
At that time, the insolvency rate per 10,000 companies peaked at 113.1. In the year up to July 2024, it was 56.6 per 10,000.
Although the Insolvency Service only records figures for England and Wales, in Scotland too, according to the relevant government agency, Accountant in Bankruptcy, there was an increase in insolvencies by 21 percent to 117 compared to July of the previous year.
In Northern Ireland, the number of bankruptcies rose by 53 percent compared to last year. However, due to the small number of companies, this percentage increase is less reliable – around 20 companies went bankrupt during the month.
Sarah Rayment, head of global restructuring at Kroll, said the year-on-year increase in England and Wales was “no cause for concern”.
“Certainly, if you compare the overall picture with recent years, there are reasons to be happy.
“We are keeping a close eye on inflation, but overall there is growth and confidence and economists expect further rate cuts in the coming months.
“There is therefore naturally more activity among companies that want to expand and acquire.
“However, positive signals do not immediately mean good news for all companies.
“Credit costs are still high and many companies want to refinance in the coming months.
“The question is whether they have enough financial flexibility with higher borrowing costs or whether their lenders will give them enough flexibility.”
In addition, the Insolvency Service announced that 10,524 people had filed for bankruptcy in England and Wales in July 2024.
This was comparable to the figures for June 2024 and 24% higher than July 2023.
